YOU ARE HERE: LAT HomeCollections


McKesson Revises Earnings Again

Health care: Firm's shares fall 12% after it finds more sales inaccuracies at software business it bought.

May 26, 1999| From Bloomberg News

McKesson HBOC Inc., the largest U.S. drug wholesaler, said Tuesday it found more improperly recorded sales from a software business purchased in January, forcing it for the second time in a month to reduce previously reported profit.

McKesson shares fell as much as 12% after the company said it will reduce earnings by an undisclosed amount for the four quarters through March 31.

"This has clearly raised the question about whether any number can be trusted at HBOC," said Richard Vietor, a Merrill Lynch analyst with a "neutral" rating on McKesson. "It's the uncertainty that the market is dealing with."

The shares have fallen 47% since April 28, when San Francisco-based McKesson first said it had a problem and reduced fiscal 1999 profit by 4.4%. Stock lost $4.69 to close at $33.50 on the New York Stock Exchange.

When the $13.9-billion purchase of HBO & Co. was announced in October, McKesson stock tumbled as investors questioned the logic of combining a drug wholesaler with a software company.

McKesson President and Chief Executive Mark Pulido had to work hard to overcome investor resistance to the purchase, which came after an earlier attempt to combine the two companies failed.

The second restatement of earnings arrives amid weakness in the health-care software industry.

Since McKesson bought HBO, the largest U.S. health-care software company, industry sales have slowed as hospitals and medical offices put off the purchase of new software to concentrate on solving the year 2000 computer problem, which could cause computers to malfunction at the end of the year.

"There are so many fundamental problems in the health-care information technology industry right now," said Steven J. Valiquette, a Warburg Dillon Read analyst. "The timing of the HBO acquisition couldn't have been worse."

McKesson is continuing to investigate HBO's reported sales, which were booked before they were completed, spokesman Larry Kurtz said. There were additional conditions to be met, such as the necessary approval by a customer's board, meaning the contracts could still be canceled, he said. McKesson expects most of the contracts to be completed.

McKesson said it will send the final results of the investigation to shareholders with its proxy statement, which it wants to mail next month, Kurtz said.

"It's going to go out with the proxy," he said. "It remains on target for mid-June, but that could slip."

McKesson said it's possible that prior years' results will require restatement.

Los Angeles Times Articles